Banking
Banking on data: How storage powers digitalised banking
Global Banking & Finance Review®
Company
By Grigory Nikonov, Systems Engineer at Western Digital
The pandemic led to a surge in the adoption of online banking apps in the UK, as traditional banks faced the challenge of increased digitalisation, with the largest increases being for the use of mobile banking applications, as research from UK Finance.org shows. In addition to this, the research reveals that 81% of surveyed adults consider the quality of online experience as a determining factor when choosing a bank. In this rapidly evolving landscape, challenger banks have emerged as formidable competitors, who prioritise on giving an exceptional digital-first experience. To remain competitive, traditional banks must take note of this trend and invest in their own digital offerings to deliver a seamless experience for its existing and emerging customers.
Banks have recognised that technological advancements alone are not enough to attain true digital transformation. The sector needs to consistently invest in its infrastructure to ensure trustworthiness and reliability from its customers. As more customers rely on online banking applications, providing a seamless user experience becomes imperative to stand out in a growing market. Effective storage solutions form the backbone that supports and maintains effective customer access in the digital banking ecosystem. By prioritising customer experience and safeguarding data, the financial services sector can effectively support the growing demand for digital banking services and deliver a superior user experience for all customers, regardless of age or demographic.
The way customers interact with their banks and financial institutions has changed significantly, from paper-based files to storing customer information online and in the cloud. According to a recent Parliamentary debate, there are approximately 5,000 banks on UK high streets in 2023, which is a 75% decrease on the number of branches there were in the late 1980s. This shift from brick-and-mortar banks to digital, and the rise of neobanks (banks that solely operate online with no physical presence), has caused a significant increase in the production of data and metadata. In turn, these rising quantities of data require constant, scalable, and more innovative storage solutions. The volume of collected data will vary bank-to-bank, and their storage needs will vary too, all depending on the digital operations of each bank. Regardless, all banks – whether a hybrid of brick-and-mortar and online or a neobank – are now requiring more robust storage solutions to facilitate the running of their business due to their enhanced presence online.
Before the advent of modern banking, banks only stored basic customer information, such as customer names, dates of birth, addresses and bank account details. However, with the rise of digitalised banking, financial institutions have started to collect more insightful data around customer transactions. This includes metadata around customer spending patterns to determine potential credit risks, implementing risk management processes and information collected during customer surveys. With the increasing implementation of artificial intelligence (AI), banks collect insights which need to be effectively stored, managed, and secured for individual data protection and security. Financial institutions need to evaluate their current storage requirements and implement more scalable, effective solutions to handle growing data needs.
Flash storage, which includes solid-state drives (SSDs), has been widely used by businesses and financial institutions since the late 1980s because of its fast performance and low delays in retrieval times. SSDs can enable faster access to data (so-called ‘hot storage’) compared to traditional hard disk drives (HDDs), which are respectively known in the industry to storage and manage ‘cold’ or ‘warm’ data.
UK banks can leverage flash storage to expedite data intensive tasks, such as processing their customers’ transactions and analysing information in real-time. However, both ‘hot’ storage (SSDs) and ‘cold’ storage (HDDs) play important roles in data management. ‘Hot’ storage is crucial for live and active information that banks require immediate access to, such as transactional data. On the other hand, ‘cold’ storage is used for storing inactive and archival data. HDDs might not provide the same access speed for data retrieval, but they offer higher capacities and are more cost effective due to a lower price per terabyte and other total cost of ownership (TCO) variables. When it comes to archival data, the key consideration is the level of accessibility required. While both data backups and archives are retrievable, it can take between minutes and hours to retrieve ‘cold’ storage data from archives. This can involve manual searches and can vary on the type and size of the data stored.
Modern banking now means institutions are incorporating data analytics and AI capabilities into their storage solutions. In fact, one analyst expects the AI-powered storage market is to be valued at around $25 billion by the end of 2025. AI can be used to identify and optimise a bank’s data storage requirements, segment the data into live and archival data, and even automate storage management processes and timelines.
Digital and brick-and-mortar banks are under pressure to keep up with changing expectations around providing the ultimate customer experience. This requires both high performing and high-capacity storage solutions to ensure the experience is frictionless, and customers have quick access to their data and services.
The future of online banking will lead to increased convenience for customers, but banks must make sure they have the right infrastructure in place. To remain competitive, banks must enhance their storage solutions to stand out in a crowded market. The rapid growth of digital banking has led to vast amounts of live and archival data. By investing in scalable and secure storage solutions, banks can provide personalised customer experiences. Real-time transactions and data-driven insights will be worthy of consumer confidence, developing a solid foundation of trust with both new and existing customers. Efficient storage solutions will form that backbone to enhance the sector.
Digital banking refers to the use of digital technology to provide banking services online, allowing customers to perform transactions, access accounts, and manage finances through mobile apps and websites.
Customer experience in banking refers to the overall perception and satisfaction a customer has with a bank's services, influenced by factors like ease of use, responsiveness, and the quality of interactions.
Artificial intelligence in finance involves using machine learning and data analytics to enhance decision-making, improve customer service, and automate processes within financial institutions.
Flash storage is a type of data storage technology that uses flash memory to provide fast access to data, commonly used in solid-state drives (SSDs) for quick data retrieval and processing.
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